5 Reasons How Low-Cost Carriers Make Money
5 Reasons Why Low-Cost Carriers Make Money
Let’s sit back and imagine ourselves in a situation where we are very happy, very successful, yet find ourselves looking for something new. Something exciting. You’ve always loved aviation and were keen into it. You would never call yourself an aviation geek. But you know everything that’s happening in the industry. You’ve read every news article, a href="/aviation-blog/2018/history-concorde-part1">every aviation history piece and you thrive whenever you fly. Because you are successful, you are also very rich. So you decide to establish an airline in Europe. However, you have a brother. Let’s call him Bryan. Oh, and you are called LuftHans (because your dad loved aviation so much and was German (Luft – air in German)). Now the two are you are very competitive between each other. So your brother joins in and establishes his own airline, called Bryanair. You, on the other hand, name your airline LuftHans. Bryan is a very traditional man – he likes to operate in a way that is secure and is guaranteed to make money. At the same time, he likes variety and likes to make eccentric decisions. So Bryanair is a traditional airline that is entering the market, flying a wide range of aircraft to various destinations around the world from Europe. Now you are very innovative. You do not like to spend too much money, but if the opportunity arises to make a decent amount of profit – you pounce on it. You like to keep things clean and if you like one brand – you become an ambassador for life. That is why LuftHans is a low-cost carrier. So, how does LuftHans, a low-cost carrier, plan to make money?
1. One size fits them all
One thing low-cost airlines have in common is that they use only one type of aircraft. Whether it is an Airbus A320 or a Boeing 737, the costs of maintaining a single type of airplane are significantly less. You train Cabin Crew, Pilots and Engineers on the ground to serve and fly your fleet. Because your fleet consists of only Airbus A320, the costs of that are significantly lower. Ryanair's Boeing 737-800
2. Newcomers, welcome!
A lot of people starting out in aviation nowadays begin their careers in smaller airlines or in a low-cost carrier. Since low-cost airlines, such as LuftHans, expand rapidly, they need the crew. They also need to save money in order to stay afloat and cover other expenses which they cannot control (such as fuel). So they hire people just starting out their careers and those people usually do not mind the lower wages, as they strive to make progress in their careers. They also do multiple jobs. For example, you can find Flight Attendants checking in the people at the gate or cleaning the aircraft between the flights.
3. Luxury is an antonym of low-cost
While Bryanair takes pride in serving the best meals, having the best in-flight entertainment and seats that can feel like beds. LuftHans does not offer the same. No entertainment, no free meals and the seats barely recline. All of those things cost money and time, which to a low-cost carrier is everything. Low-cost airlines also sell duty-free items onboard and commodities such as registered baggage cost money and are expensive. You have not checked-in at home? Pay a massive fine at the airport. That’s why airlines such as LuftHans make money when even on the ground. Cheapest seats on an airplane
4. Luton is not London. Or is it?
Airports such as Charles De Gaulle in Paris, Heathrow are expensive to fly to. The fees are very high, slots are limited so profit margins are small. That’s why LuftHans would fly to Luton or any other airport that is relatively near big cities. And I’m using the term “relatively” very loosely because usually, these airports are at least 40-50 kilometers away from the actual city they fly into. Low-cost carriers brand these small airports in the middle of nowhere after the nearest biggest city. Because the flights there are so cheap, people will still fly to them. So usually airlines flying to airports such as Luton, Paris Beauvais and Frankfurt-Hahn (an airport which is actually 120 km away from Frankfurt) have a huge amount of negotiating power. If the airport decides to increase the fees, two things might happen:
- The airline says no and the airport becomes sad but has to give in;
- The airline goes away and the airport goes bankrupt, as nobody else apart the budget airline flies there.
5. A conveyor belt
LuftHans’ aircraft would operate non-stop. Low-cost airlines typically schedule 45 minutes between each flight. Each aircraft usually does 4 to 5 flights per day. That is why every aircraft is constantly making money. Maintenance is done during the night so that when the morning comes – the aircraft can start flying again. To sum up – low-cost airlines, such as the hypothetical LuftHans, makes money because they limit their expenses to the minimum, while still managing their assets at the maximum. Every cost that a standard carrier has to endure, their budget counterpart avoids it. Source
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